The manager of Norway’s sovereign wealth fund is optimistic that booming demand for logistics space will continue beyond this year, after making a 40% return from its investments in the sector.

The NOK12.3trn (€1.6trn) Government Pension Fund Global (GPFG) released its annual results on Thursday, showing that, in kroner terms, its investments had produced the second largest return in its history – with the largest gains from technology stocks and real estate.

Listed real estate generated a 28.6% return for fund, while unlisted property returned 13.6%, but its growing logistics portfolio – which now makes up around a third of the unlisted real estate portfolio – posted even higher performance.

Edward Lerum, head of global logistics at Norges Bank Investment Management (NBIM), which manages the fund, said: “There was so much growth in e-commerce in 2020, that I don’t think it’s been fully realised from an occupier demand aspect.”

He told a NBIM news conference this week that companies still needed time to “right size” their space and to recalibrate their warehouse strategies. “And so what we saw in 2021, I think we’re going to see more of it in 2022,” he said.

“But then just looking forward past 2022, e-commerce provides such convenience for the consumers that I think consumers are going to demand more and more e-commerce, and I think companies are going to find more and more ways to provide e commerce.”

Earlier this month, GPFG invested £220m (€256m) for a stake in a portfolio of 14 logistics properties in the UK via its partnership with asset manager Prologis.

Lerum said there was significant variance in the level of e-commerce in different countries and was therefore optimistic about growth in countries still lagging the e-commerce trend.

Mie Caroline Holstad, chief real assets officer, said the reduced impact of the pandemic on the logistics sector, along with attractive yields compared to fixed-income alternatives and the recognition of real estate as an inflation hedge had been the main factors behind the strong returns for the asset class.

She added that NBIM’s private retail and office investments had also performed well during the year.

“It seems like working from home is here to stay in one shape or another,” she said. “We still see that relatively new high-quality properties continue to attract tenants and we also see that retail is still going under a challenging period, but we do see numbers picking up here as well.”

She said the combined listed-and-unlisted real estate strategy gave NBIM the flexibility to exploit market disruptions – something it would continue to pursue.

“We actually deployed about US$7bn (€6.26bn) into the market during the year, and this had a significant impact on our performance in 2021,” she said.

The US portion of the portfolio now represented about half the size of the listed portfolio in total, she said, and the best performing sectors in the US had been retail and residential.

The strong performance from real estate comes soon after a review of GPFG’s real estate allocation showed that the asset class had not boosted returns over the past decade – although it had led to a better risk-adjusted performance.